Motivation and the annual raise

The University of Michigan has an annual rite: Departments and organizations are allocated a pool of money, typically some small fraction of the total salaries in that department or organization, and managers assign some portion of it to each staff member as an annual increase in base pay. The overall increases are not large by any means, and it isn't that unusual for people to view it almost as a cost-of-living increase.


Along this same topic, I've also been reading a book called Drive written by a gent named Daniel Pink. The book is an interesting read and essentially argues that reward-based systems are just great for mechanical, repetitive work, but actually have the opposite effect if the work requires any sort of creativity whatsoever. In particular, when there is a task or project at hand, it kills performance when there is some type of "IF-THEN" statement made up front, like: "IF you deliver the solution quickly and correctly, THEN you will get a bigger reward." He makes a pretty compelling case.

There's a nice video from TED where Pink presents the core argument from his book too. He's a good speaker, and even if you've read the book, the video is also worth watching.

And so I've been thinking about how Pink's advice in Drive relates to this annual rite at Michigan.

One possible scenario is that Pink is right, and instead of differentiating raises across different staff, everyone should just get the same increase. All of the tech staff are doing creative work on a daily basis, and since we know cash incentives result in worse performance, that makes the most sense.

Another possible scenario is that Pink is still right, but because this process occurs only once per year, the relationship between the performance on any one job or task is almost wholly unrelated to the increase. I cannot think of a single time where I based an annual increase on a single project or task. And because the increase does not take the form of "IF you do a good job on project X, THEN you will get a better raise", maybe it doesn't apply? Maybe the raise is really saying, "BECAUSE you did such a good job on so many different things over this past year, we're recognizing this with a higher increase"?

He does go on to say that when a reward is given after the fact, and is unexpected, this does have the anticipated result, and is motivating. Maybe a higher annual raise is more like this - unexpected, and more like a thank you?